Delour Inc. was incorporated in 2014 and adopted a calendar year. Here is a schedule of Delour's net Section 1231 gains and (losses) reported on its tax returns through 2019. $\begin{array}{lr}2014&2015&2016&2017&2018&2019\\$(4,900)&\$-0-&\$-0-&\$-0-&\$(12,000)&\$-0-
\end{array}$
In 2020, Delour recognized a $50,000 gain on the sale of business land. How is this gain characterized on Delour's tax return?

Question

Delour Inc. was incorporated in 2014 and adopted a calendar year. Here is a schedule of Delour's net Section 1231 gains and (losses) reported on its tax returns through 2019. $\begin{array}{lr}2014&2015&2016&2017&2018&2019\\$(4,900)&\$-0-&\$-0-&\$-0-&\$(12,000)&\$-0-
\end{array}$
 In 2020, Delour recognized a $50,000 gain on the sale of business land. How is this gain characterized on Delour's tax return?

Quizplus · Accepted Answer

Delour has a net Section 1231 loss of $16,900 from the past five years (2014 and 2018). The first $16,900 of the 2020 gain is recaptured as ordinary income, and the remaining $33,100 is treated as Section 1231 gain.